Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 18: A Decade of Tax and Benefit Reforms in Sweden - Effects on Labour Supply, Welfare and Inequality

Thomas Aronsson and Mårten Palme ()
Additional contact information
Mårten Palme: Dept. of Economic Statistics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden

Abstract: Sweden has experienced a sequence of tax and benefit reforms during the last decade. The purpose of this paper is to evaluate these extensive reforms from the points of view of labour supply, welfare and inequality. As a basis of the analysis, we use the household labour supply model, which is estimated using cross- section data from 1980. Simulation of the model reveals that tax and benefit reforms have led to a considerable reduction of the excess burden. Regarding inequality we are less conclusive, since these results depend on whether we define "income" as disposable income or money metric utility.

Keywords: Household labour supply; equity-efficiency tradeoff

JEL-codes: D63; J22; H24

41 pages, May 1994

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